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CFA Institute Survey on the AIFM Directive: Majority of CFA Institute Members in European Union Vote for Regulatory Authorization of Managers of Alternative Investment Funds

 

Members also support need for independent third party valuations and access for managers from third countries

 

London, November 3, 2009 – Ninety-four percent of respondents¹  to a survey conducted by the CFA Institute Centre for Financial Market Integrity ("the Centre"), support mandatory requirements consistent with the proposed Alternative Investment Fund Managers Directive that managers of alternative investment funds act with honesty, fairness, and with the best interests of investors in mind. The Centre supports this notion as a necessary step to address issues of trust and the need for a more transparent marketplace.  

 

Eighty percent of respondents believe that alternative investment fund managers should be mandated to appoint an independent third party for the valuation of assets. Such a move is important in order to limit the potential for fraud and ensure that investors’ interests in the funds are valued properly.

 

Fifty-nine percent of respondents believe that managers of alternative investment funds should be subject to regulatory authorization when marketing to professional or retail investors. Sixty percent of respondents feel that different types of funds should be subject to appropriately differentiated rules within the same basic framework.

 

With regard to access from a third country, 79 percent feel that managers and funds that are not based in the European Union should be able to market in the EU, provided the third country regulatory and supervisory standards are at least comparable to the EU. Only two percent feel that access from a third country should not be allowed.

 

In contrast, CFA Institute members do not believe that regulatory authorities should have full control over alternative investment funds: 60 percent of respondents do not agree that authorities should have the capacity to set limits on levels of leverage used by alternative investment fund managers in their funds. Sixty-eight percent disagree with the notion that authorities can place limits on the extent of short-selling activity carried out by alternative investment fund managers.

 

View full results here (PDF)

 

Commenting on the findings, Charles Cronin, CFA, head of the CFA Centre for Financial Market Integrity (Europe, Middle East, and Africa) said, “The CFA Institute Centre does not believe that the Alternative Investment Fund Managers Directive will be detrimental for the alternatives business, just as the ‘non-Alternative’ sector operates well under UCITS regulation. Our members have signaled that regulation in this sector is necessary, along with equivalent transparency and disclosure. The Centre also feels it is important to ensure that the system is balanced in favor of client interest and that it addresses the issues of systemic risk to prevent future crises.”

 

As well as conducting surveys, the CFA Institute Centre has recently published the 2009 Financial Market Integrity Index, a report looking into the perceptions investment professionals have about the state of ethics and integrity in six major financial services markets, and the Asset Manager Code of Professional Conduct (PDF), an outline of the ethical and professional responsibilities of firms that manage assets on behalf of clients. More CFA Institute Centre publications are available for free download at CFA Institute Centre Publications.

 

(Editor’s Note: the survey was conducted by e-mail between 9 October 2009 and 22 October 2009, among 14,333 CFA Institute members based in the Europe. In total, 1,279 responses were received. For results based on samples of this size, the margin of error is ±2.6 percentage points at the 95 percent confidence level. Margin of error varies slightly by question as the number responding to each question varies. Survey analysis was conducted at the aggregate level as well as at the EU and Non-EU level and in the UK and Switzerland. Margin of error is larger for subgroup analyses.)